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Contributions to Economics
Tiago Sequeira
Liliana Reis Editors
Climate Change
and Global
Development
Market, Global Players and Empirical
Evidence
Contributions to Economics
More information about this series at http://www.springer.com/series/1262
Tiago Sequeira • Liliana Reis
Editors
This Springer imprint is published by the registered company Springer Nature Switzerland AG.
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Tiago Sequeira and Liliana Reis
v
vi Contents
Contents
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Abstract Nowadays, one of the most important issues crossing international rela-
tions with economics is climate change. “Environmental issues cut across a range of
topics, namely security and economics, two areas of major importance to the state”
(Pereira, Revista Brasileira de Política Internacional, 58(1):194, 2015). Indeed, the
editors of this book realized that this topic is still receiving too little attention from
the two scientific areas.
The aim of this book from the outset is therefore to understand the implications of
climate change on several questions pertaining to economics and international
relations fields and how climate change could jeopardize the overall development
of the design of the international system, as we have known until the present. Truly,
the main subject of concern to international relations and economics is governance,
namely, good governance, and how it affects power to maximize state interests and
resources in order to obtain quality of life for individuals. The rational choices taken
by sovereign states concerning environmental issues and policy decisions on climate
change lead to good or bad outcomes for all human beings, unlike decisions on
internal policies that affect only the state’s citizens themselves.
T. Sequeira (*)
Universidade da Beira Interior and CEFAGE-UBI, Covilhã, Portugal
e-mail: sequeira@ubi.pt
L. Reis
Universidade da Beira Interior, Covilhã, Portugal
Instituto Português de Relações Internacionais (IPRI-NOVA), Lisboa, Portugal
Nowadays, one of the most important issues crossing international relations with
economics is climate change. In fact, “Environmental issues cut across a range of
topics, namely security and economics, two areas of major importance to the state”
(Pereira 2015, p. 194). Indeed, the editors of this book realized that this topic is still
receiving too little attention from the two scientific areas.
The aim of this book from the outset is therefore to understand the implications of
climate change on several questions pertaining to economics and international
relations fields and how climate change could jeopardize the overall development
of the design of the international system, as we have known until the present.
Truly, the main subject of concern to international relations and economics is
governance, namely, good governance and how it affects power to maximize state
interests and resources in order to obtain quality of life for individuals. The rational
choices taken by sovereign states concerning environmental issues and policy
decisions on climate change lead to good or bad outcomes for all human beings,
unlike decisions on internal policies that affect only the state’s citizens themselves.
This book on climate change and global development brings together a number of
texts from academics from various countries (and continents) and from the two
scientific areas, with a view to enlightening what is at stake in relation to climate
change and the future of global development. For this, the overall aim of this book is
not to provide a guide to the complexity that covers all areas of climate change to IR
and economics but to realize from an empirical basis and epistemological frame-
work, with the use of several specific case studies regarding the experience of
climate change to global development, the commitment and setbacks that the former
have in the second, under the auspices of multilevel governance, namely, local,
national, and supranational governance.
This book is organized into three parts, after this Introduction. In the first part, the
chapters deal with market approaches to climate change mitigation as well as the
effects of climate change on market outcomes, namely, economic growth and
industrial output. Part 2 addresses deals with climate change policies in an interna-
tional bilateral and multilateral countries environment, covering the action of global
players. Part 3 deals with more micromanagement approaches to climate change
mitigation.
With this organization we seek to provide the reader with a comprehensive
approach to the challenges of climate change for the international multicountry
relationship which broadly bases on market forces, thus providing information and
quantification of the market incentives that can help to mitigate the consequences of
climate change.
Regarding international relations, climate change can be seen from several
standpoints: as a threat to international security and as a potential enhancer of future
conflicts, how states negotiate international treaties and the evolution they have
known in international law, and also as climate issues present in the states them-
selves, defending fundamental values so that they can be perceived as benign powers
by others.
But to some authors (Jacobsen 1999, p. 206), “IR scholars did not begin writing
about the environment until the late 1980s.” After this period the debate on climate
Introduction 3
states that created them, and therefore they take on a permanent character. In the
context of climate change, this seems to be an important feature, since global climate
negotiations also take place outside of the exclusive realm of interstate relations.
Keohane and Nye (1989, p. 55) argue, “institutions within the international system
establish a network of interactions that will be difficult either to eradicate or
drastically rearrange.”
Haas et al. (1993) argues that, in the absence of world government, international
institutions have three positive effects on the environment: (1) they can create high
levels of governmental “concern,” (2) they can function as hospitable “contractual”
environments in which agreements can be made and kept, and (3) they can build
sufficient political and administrative “ability” in national governments. In fact, once
a treaty that governs states’ responsibilities vis-à-vis climate change has been set up
and institutionalized, actors party to the treaty will be bound to a certain extent by the
treaty’s content, delimiting the range of legitimate courses of action. In fact, inter-
national organizations and nongovernmental organizations can play an especially
crucial role as agenda settings, framing the climate change discussion and putting
pressure on state actors. Thus, much of the interstate discussion within climate
change politics is based on institutions such as the United Nations Framework
Convention on Climate Change (UNFCCC) or institutionalized frameworks such
as the regular Conferences of the Parties (COP). Since institutions have become the
most important actors in the discussion on climate change politics, the analysis of a
neoliberal institutionalist framework is obligatory.
The United Nations Framework Convention on Climate Change (UNFCCC) is
the first and main international agreement on climate action. It was one of three
conventions adopted at the Rio Earth Summit in 1992. Until now, it has been ratified
by almost 200 countries. It started as a way for countries to work together to limit
global temperature increases and climate change and to cope with their impacts
(Blobel and Meyer-Ohlendorf 2006). The Parties to the Convention agreed that the
extent to which developing nations can meet their treaty obligations would depend
on the extent to which developed countries provide finance and technology and that
developed countries “should take the lead in combating climate change and the
adverse effects.” According to the agreement, “Economic and social development
and poverty eradication are the first and overriding priorities of the developing
country parties” (Gupta 2010).
The climate change international process revolves around the annual sessions of
the COP, which bring together all countries that are Parties to the Convention.
Article 7.2 defines the COP as the “supreme body” of the Convention, as it is its
highest decision-making authority (United Nations Framework on Climate Change
1998, p. 27).
The first major change came in 1997 at the third Conference of the Parties, when
Parties to the UNFCCC adopted the Kyoto Protocol (United Nations Framework on
Climate Change 1998). This agreement created the first and only legally binding
targets for developed nations to reduce their emissions, as well as important inter-
national monitoring, reporting, and verification mechanisms to enforce compliance.
To help countries meet their targets, the protocol created “flexibility mechanisms”—
Introduction 5
such as carbon trading and the Clean Development Mechanism, which allows
industrialized nations to reach their targets by investing in emissions reductions in
developing nations.
After Protocol Kyoto, the recent Paris agreement constitutes the most important
step in addressing climate change by the international community. It is considered by
some authors (Dimitrov 2016) as a political success in climate negotiations interna-
tional and traditional state-based diplomacy, because the twenty-first Conference of
the Parties (COP-21) was a culmination of a 4-year diplomatic process and was a
genuine collective effort to reach mutual compromise and contains policy obliga-
tions for all countries. The election of Donald Trump as 44th president of the United
States and his individual position against international climate accords, and all
environmental issues, not surprisingly determined the position of the United States
with regard to the Paris Agreements, but does not negate the importance of the
agreement.
Indeed, what has been achieved by the United Nations since the United Nations
Framework Convention on Climate Change in 1992 to date (as can be seen in
Table 1) is truly remarkable and reflects a culture of compromise in international
relations between states. It is important not only from the point of view of mere
international negotiations but also from the need to respond to a global problem
through a “global government” for the climate, approaching a utopian form of Kant’s
universal cosmopolitanism.
Over the last 25 years, the United Nations has failed to respond to all of the
challenges of global development through climate change but have succeeded in
creating a “green agenda” in parallel with human rights, from which states today can
hardly escape.
To the constructivist approach “We must acknowledge that the debate over
climate change, like almost all environmental issues, is a debate over culture,
worldviews, and ideology” (Hoffman 2012, p. 32). More specifically, constructivism
posits that ideas shape actors’ decisions and behaviors: “The central insight of
constructivism is that collectively held ideas shape the social, economic, and polit-
ical world in which we live.” The moral imperative to protect and preserve the
environment is a norm that developed primarily in the twentieth century. Originating
in the endangered species protection movement, the environmentalism movement
went through three primary moves, each with influential factors, before it became the
norm it is today: firstly, it moved from a national norm to an international norm;
secondly, its structure shifted to combine governmental and nongovernmental ele-
ments; and, thirdly, it developed into a norm with an international focus, which is
different than a national norm spreading to other nations while still having a
domestic focus (Epstein 2006, p. 39).
According to Alexander Wendt (1992, p. 398), “The commitment to and the
salience of particular identities vary, but each identity is an inherently social
definition of the actor [. . .] which constitute[s] the structure of the social world.
Identities are the basis of interests.” So one of the key aspects of the development of
the environmental movement was the resolution in rhetoric and discourse about
6 T. Sequeira and L. Reis
Table 1 (continued)
Date Event Achievements/developments
December The third Conference of the Parties The world’s first greenhouse gas emis-
11th, 1997 achieves an historical milestone with sions reduction treaty
adoption of the Kyoto Protocol
Bonn, July A major breakthrough is achieved at the Governments reaching a broad political
2001 second part of the sixth Conference of agreement on the operational rulebook
the Parties meeting in Bonn for the 1997 Kyoto Protocol
Marrakesh, The seventh Conference of the Parties This would formalize agreement on
November results in the Marrakesh Accords, set- operational rules for International
2001 ting the stage for ratification of the Emissions Trading, the Clean Devel-
Kyoto Protocol opment Mechanism and Joint Imple-
mentation along with a compliance
regime and accounting procedures
January EU Emissions Trading launches The European Union Emissions Trad-
2005 ing Scheme, the first and largest emis-
sions trading scheme in the world,
launches as a major pillar of EU climate
policy. Installations regulated by the
scheme are collectively responsible for
close to half of the EU’s emissions of
CO2
February Kyoto Protocol enters into force History is made when the Russian
16th, 2005 Federation submitted its instrument of
ratification to the Kyoto Protocol,
sealing its entry into force
December The eleventh Conference of the Parties For the first time held in conjunction
2005 (COP 11) in Montreal with the first Conference of the Parties
serving as the Meeting of the Parties
(CMP 1)
January Clean Development Mechanism opens The Clean Development Mechanism, a
2006 key mechanism under the Kyoto Pro-
tocol, opens for business
November Twelfth Conference of the Parties held The Subsidiary Body for Scientific and
2006 in Nairobi-Kenya Technological Advice SBSTA is man-
dated to undertake a program to address
impacts, vulnerability, and adaptation
to climate change—the Nairobi Work
Programme NWP activities are
ongoing
December The thirteenth Conference of the Parties The plan has five main categories:
2007 adopts the Bali Road Map, including the shared vision, mitigation, adaptation,
Bali Action Plan, charting the course for technology, and financing
a new negotiating process to address
climate change
January Joint Implementation Mechanism starts The Kyoto Protocol mechanism “Joint
2008 Implementation” starts. This allows a
country with an emission reduction or
limitation commitment under the pro-
tocol to earn emission reduction units
(continued)
8 T. Sequeira and L. Reis
Table 1 (continued)
Date Event Achievements/developments
(ERUs) from an emission reduction or
emission removal project in another
country with similar commitments
December The fourteenth Conference of the Parties Delivers important steps toward
2008 in Poznan, Poland assisting developing countries, includ-
ing the launch of the Adaptation Fund
under the Kyoto Protocol and the Poz-
nan Strategic Programme on Technol-
ogy Transfer
December World leaders gather for the fifteenth Developed countries pledge up to USD
2009 Conference of the Parties in Copenha- 30 billion in fast-start finance for the
gen, Denmark, which produced the period 2010–2012
Copenhagen Accord
December The sixteenth Conference of the Parties The Green Climate Fund, the Technol-
2010 results in the Cancun Agreements, a ogy Mechanism, and the Cancun
comprehensive package by govern- Adaptation Framework are established
ments to assist developing nations in
dealing with climate change
December At the seventeenth Conference of the Momentum for Change, a special ini-
2011 Parties, in Durban, South Africa, gov- tiative of the UNFCCC, shines a light
ernments commit to a new universal on innovative and transformative cli-
climate change agreement by 2015 for mate action taking place around the
the period beyond 2020, leading to the world
launch of the Ad Hoc Working Group
on the Durban Platform for Enhanced
Action or ADP
December At the eighteenth Conference of the They also adopt the Doha Amendment,
2012 Parties, in Doha, governments agree to launching a second commitment period
speedily work toward a universal cli- of the Kyoto Protocol
mate change agreement by 2015 and to
find ways to scale up efforts before 2020
beyond existing pledges to curb
emissions
September New home for UNFCCC secretariat The UNFCCC secretariat moves to its
2013 new headquarters on the UN Campus in
Bonn, next to the former German Par-
liament building. Following major
improvements, the building is now a
beacon of environmental performance
deploying features like solar power and
smart lighting
September IPCC releases second part of Fifth The UN Intergovernmental Panel on
27th, 2013 Assessment Report Climate Change (IPCC) releases the
Working Group 1 contribution to its
Fifth Assessment Report (AR5), on the
science of climate change
November The nineteenth Conference of the Parties agreed an “international mech-
2013 Parties produces the Warsaw Outcomes, anism for loss and damage,” which
(continued)
Introduction 9
Table 1 (continued)
Date Event Achievements/developments
including a rulebook for reducing emis- recognizes that if mitigation does not
sions from deforestation and forest deg- take place quickly enough and if coun-
radation and a mechanism to address tries cannot adapt to the resulting cli-
loss and damage caused by long-term mate change, detrimental impacts will
climate change impacts be inevitable. Developing countries
want this mechanism to be a channel
through which they can seek compen-
sation from countries with high green-
house gas emissions for this damage
The next milestone conference will be
COP 21 in Paris in 2015, when parties
are meant to agree on a comprehensive,
legally binding global agreement
March 31st, IPCC releases second part of Fifth The UN Intergovernmental Panel on
2014 Assessment Report Climate Change (IPCC) releases the
Working Group 2 contribution to its
Fifth Assessment Report (AR5), on
impacts, adaptation, and vulnerability
September UN Secretary-General’s Climate UN Secretary-General Ban Ki-moon to
2014 Summit host a climate summit in New York,
inviting Heads of State and Govern-
ment, business, finance, civil society,
and local leaders to mobilize action and
ambition on climate change in advance
of COP 21 in Paris in 2015
December At the twentieth Conference of the World governments will have the
2014 Parties, in Lima opportunity to make a last collective
push toward a new and meaningful
universal agreement in 2015 and
explore the opportunities that biodiver-
sity and climate market incentives can
provide for climate change action and
sustainable development
December COP 21—Historical Paris Agreement 195 nations agreed to combat climate
12th, 2005 adopted change and unleash actions and invest-
ment toward a low-carbon, resilient,
and sustainable future. The Paris
Agreement for the first time brings all
nations into a common cause based on
their historic, current, and future
responsibilities
November COP 22—Marrakech Partnership for A crucial outcome of the Marrakech
2016 Global Climate Action launched climate conference was to move for-
ward on writing the rule book of the
Paris Agreement
The conference successfully demon-
strated to the world that the implemen-
tation of the Paris Agreement is
(continued)
10 T. Sequeira and L. Reis
Table 1 (continued)
Date Event Achievements/developments
underway and launched the Marrakech
Partnership for Climate Action
November The 2017 UN Climate Change Confer- Bonn will also make history by being
2017 ence will take place from 6 to the first COP to be presided over by a
17 November at the World Conference small island developing state: in this
Center in Bonn, Germany, the seat of the case by the Presidency of Fiji
Climate Change Secretariat
Source: Elaborated by authors from United Nations Framework Convention on Climate Change,
available https://cop23.unfccc.int [accessed 10 March 2018]
“green planet” and measures to sustainable development that at the same time protect
the planet and address climate change efficiently.
According to Riviere (2014, p. 92), “The proliferation of the environmentalism
norm and its effect on constructing political economies depends on its adaption into
states’ identity. States’ identities influence their behaviours because the identity
contains within it norms and ideas that construct the field of possible actions.
More specifically, since states interact with each other internationally, a state’s
identity is partially a social construction.”
International agreements and negotiations are, as we have seen, one of the
fundamental foundations for international relations whether analyzed from the
point of view of state “interests” and “threats” or from the point of view of
international cooperation and international organizations or from a point of view
of norms, values, and ideas. How can theories of international relations explain some
of the dilemmas confronting all actors of international system, and perhaps more
importantly, how can international relations theories explain some of the dilemmas
facing the international system in the face of climate change, which seem to be the
big issue for the next few years?
In fact, if we look back at history and evaluate human mobility, we predict that
most human movements had climate factors as the main cause, and most wars have
been waged as a result of environmental factors, climate changes, and control of
natural resources. After all, it is the assumption of this control that maximizes the
power of state actors, among others. It is the assumption of this control that
maximizes the power of state actors.
From the economics point of view, there are two main approaches: (1) an
assessment of the effects of climate change on economic outcomes and (2) the
study of the incentives that can prevent or mitigate climate change. First, empirical
and theoretical research has been made to evaluate the effects of climate change (and
in particular pollution). In the resources and economic growth literature, the use of
limited or nonrenewable resources can challenge permanent economic growth if
pollution decreases utility (e.g., Aghion and Howitt 1998, Chap. 5) and if pollution
depletes nonrenewable resources that are used in production, because at some time in
the future, those resources will limit economic growth. However, technological
progress can be the way out of stagnation (Reis 2001; Roseta-Palma et al. 2010).
Empirically, climate change has been related to economic growth. However, a clear-
Introduction 11
cut answer has not been achieved. For example, Dell et al. (2012, 2014) conclude for
a negative effect of climate change in economic growth. In particular, Dell et al.
(2014) reviews the literature on the effects of climate change on the economy. On the
contrary Sequeira et al. (2018) conclude for a nonsignificant effect and a positive
effect of rising precipitation in poor countries. This positive effect of rising precip-
itation is also confirmed for hot and temperate countries.
Second, the market incentives that can prevent or not climate change mitigation
are highlighted in Balint et al. (2017). They identify four areas of the literature in
which complex models have already produced valuable insights: (1) coalition for-
mation and climate negotiations, (2) macroeconomic impacts of climate-related
events, (3) energy markets, and (4) diffusion of climate-friendly technologies. On
each of these issues, the authors argued that interactions and disequilibrium dynam-
ics provide a complementary and novel perspective to standard economic models.
Furthermore, this research highlights the potential economic benefits of mitigation
and adaptation policies and the risk of underestimating systemic climate change-
related risks.
Economics and international relations cannot be dissociated given the obvious
cross-border nature of climate change. Market incentives may be combined and
model national players in order to mitigate climate change’s potential effects. This
book bridges these two fields of research concerning climate change.
In Part 1, market economies approaches are examined. In fact interactions
between agents and governments are deeply determined by the way markets function
and incentives are placed. On the economics point of view, it is interesting to
evaluate the effects of climate change in both the short and long run. This often
involves a trade-off between potential positive effects of losing environmental
protection and negative effects of climate change in the long run. Both theoretical
and empirical approaches are used to analyze the issue, keeping in mind that on the
basis of human decisions, there are (almost) rational agents that interact for their own
good but also with some level of altruism regarding future generations. First, a game
theoretical approach is followed to build an international society based on global
common goods and interests, grounded by providing the greatest good to the greatest
number, in which the environment offers not only a challenge but, more importantly,
the chance to develop pathways to a sustainable future. An evolutionary game theory
framework solution for the global climate change game is provided. Then, another
chapter analyzes the macroeconomics of environment from an agent-based perspec-
tive, outlines directions for future developments, and identifies several domains that
lack more intensive attention from the academic community. The chapter concludes
that public policies aimed at preventing climate catastrophes must take into account
patterns of sentiment spreading, allowing for the potential economic benefits of
mitigation of environmental change-related impacts. Using a specific regression
method that allows for nonlinear empirical modelling, another chapter finds that
the effect of climate change on growth varies with the level of per capita GDP. In
assessing the effect of greenhouse gas emissions to GDP growth, a double-threshold
effect and three regimes are discovered. The assessment of the effect of CO2
emissions on GDP growth identifies only a single threshold, indicating that only
12 T. Sequeira and L. Reis
two regimes exist, confirming that the effect of climate change on growth cannot be
regarded as a linear relationship.
Part 2 analyzes international relations and politics. The recognition that climate
change is a global phenomenon without boarders is essential. Several policy issues
are discussed with special focus on the European Union (EU), the Balkans, Africa,
and the BRICS (Brazil, Russia, India, China, and South Africa). First, the discussion
addresses if the European Union authority in environmental issues is recognized in
the diplomatic arena. Related to that, although the several challenges that Balkan
states still must face, such as corruption and weak governance, the EU accession
process has been the main political driver of change in the region, providing
opportunities for improving the environment in different ways. Then the discussion
turns to Africa’s ability to benefit from sustainable development synergies embedded
in the mitigation and adaptation strategies in the INDCs and the fact that this will be
greatly limited by institutional and policy environment that hinders funding, capacity
building, and technological innovation systems development. Fourth is a discussion
of the role of the New Development Bank, known as the BRICS Bank, as the driving
force behind clean energy financing and its contribution to sustainable development.
Common to these topics are the importance of international institutions and their
policies to climate change management and mitigation at the country level. Sixth, in
a very interesting chapter about the Amazon Forest, revolutionary technologies of
the fourth Industrial Revolution are proposed as central to this necessary paradigm
shift. Because the Amazon rainforest is a global natural asset for avoiding climate
change, Brazil is also advised to follow a diplomatic plan that upholds fundamental
ecological principles for creating a safe space for humanity, thereby attracting
international investments to manage and preserve the forest.
Part 3 covers a micro approach related to climate change, related to both techno-
logical change and marketing strategies. In fact, technological change may be
essential to mitigate climate change if it can be directed to cleaner technologies.
Climate change can also be used as a marketing tool for firms in such a way that it
can be a reinforcing tool to mitigate climate change. This acts on the demand side. As
far as consumers become more concerned with climate change, they also demand
more goods produced with cleaner technologies and having reduced environmental
effects. On an alternative view, marketing tools may also act to avoid the negative
views that customers can acquire from climate change-driven events such as torna-
does, floods, or fires in well-known tourist destinations.
First, from the technological change point of view, a chapter offers a comparison
between the environmental performance of two internal combustion engine vehicles
(ICEV) with different engines, one with the conventional diesel engine and the other
with an electric motor and a diesel engine (hybrid diesel), and the results show that
the hybrid ICEV has a generally better environmental performance compared to the
diesel ICEV. Second, from the marketing point of view, marketing strategies that are
used by several companies to reduce climate change are studied. Therefore, market-
ing holds potential solutions to some of the challenges of sustainability faced today,
such as climate change. Additionally, climate change effects on a destination’s
image among tourists are analyzed in an application to the island of Madeira.
Introduction 13
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Part I
A Market Approach
Global Development and Climate Change:
A Game Theory Approach
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2 Framing Climate Change Within Our Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1 International Relations (IR) and Climate Change (CC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2 Economics and Traditional Game Theory (GT): Setting the Stage for Instrumental
Rationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3 From Traditional Game Theory to Agent-Based Simulation: The CC Contribution . . . . . . . 26
4 Conclusions, Extensions and Further Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Abstract The increasing concern with climate change is one of the main issues of
our time, and thus we aim to theoretically and mathematically analyse its causes.
However our approach follows a different stream of thought, presenting the reason-
ing and decision-making processes between technical and moral solutions. We have
resorted to game theory models in order to demonstrate cooperative and
non-cooperative scenarios, ranging from the traditional to the evolutionary within
The chapter is inspired by a previous paper by Ingo Andrade de Oliveira and Stephánie Rycken. We
would also like to thank the extremely constructive comments and suggestions from an
anonymous reviewer.
A. B. Caleiro (*)
Department of Economics, University of Évora, Évora, Portugal
e-mail: caleiro@uevora.pt
M. R. de Sousa
Department of Economics, University of Évora, Évora, Portugal
Research Center in Political Science (CICP), University of Évora, Évora, Portugal
Center for Advanced Studies in Management and Economics (CEFAGE), University of Évora,
Évora, Portugal
e-mail: mrsousa@uevora.pt
I. A. de Oliveira
University of Évora, Évora, Portugal
game theory. In doing so we are able to glimpse the development of modern society
and a paradigm shift regarding human control over nature and to what extent it is
harmful to the sustainability of our environment and the survival of future genera-
tions. Merging different fields of knowledge, we present a theoretical-philosophical
approach, combined with empirical-mathematical solutions taking into account the
agent-based behaviour guided blindly by instrumental rationality.
1 Introduction
1
As recognized in Buchholz and Sandler (2017), this effect can be reinforced if followers are
sufficiently risk-averse and/or climate change damage to be uncertain (Auerswald et al. 2011).
20 A. B. Caleiro et al.
Our approach is relevant, not only for its newness but essentially because it
provides a viable solution to a global dilemma, establishing new frontiers of research
and global policy advice in international fora. We also offer an explanation for the
many failed solutions of climate change negotiations, namely, the drawbacks in the
Kyoto protocol and the more recent Paris protocol. Our model introduces a retalia-
tion punishment and a positive feedback/cooperation award after many rounds of the
game. The innovation of our model is not only in the introduction of game theory to
the global climate change game but also the introduction of its time dimension, with
a twofold dynamic horizon with a learning environment. A point in time, say t*, if
attained yields a point of no return, and the arrival at a disastrous situation, which we
parametrize, must be avoided at all costs. A point in time, say tþ, instead must be
determined—a point from which evolutionary cooperation might save us all from the
immersing trap and thus provide a truly sustainable path out of disaster and avert
ecocide, therefore achieving a positive final solution, which we shall all consider as a
final best solution.
In Sect. 4, we end with some general conclusions, limitations encountered and
further perspectives of research.
the behaviour of objects in the environment and other human beings; these expec-
tations are used as “conditions” or “means” for the attainment of the actor’s own
rationally pursued and calculated ends (Weber 1978: 24), and later on is introduced
in other fields such as economics. In short, it is a tool used by an actor to reach an
end, where rationality is pursued and calculated.
What changed since then? The method of handling problems. In G. Hardin’s
article “The Tragedy of the Commons”, he defines technical solutions as “(. . .) a
solution that requires a change only in the techniques of the natural sciences,
demanding little or nothing in the way of change in human values or ideas of
morality” (Hardin 1968: 243–253).
Now that we have introduced some key aspects of technical solutions and
reasoning, our aim is to introduce the issue of moral solutions and value rationality.
Only then we will be able to understand the process of decision-making aided by a
game-theoretical approach.
As the twin concept of technical solutions, as it is presented in this chapter,
morality and its vast, varied and complex definitions will remain the path to
reasoning. It is the way we comprehend climate change and its importance according
to the principle of universality.
The acknowledgement of climate change [CC] is the starting point in order to
validate morality in attitudes towards the object. We cannot expect certain kinds of
behaviour to occur—for religious, cultural, scientific or any other reasons—if there
is no common agreement on the subject. The International Society2 is based on these
shared common values, which we address here in relation to the issue of CC. While
we do not wish to enter a discussion of that subject here, we do acknowledge the
conflicts of interests which arise between economic, political, industrial and other
social groups. Assuming CC as a shared common value, our theoretical and game-
theoretical approaches will have this starting point while aiming to achieve the best
outcome for all players, through reasoning.
Secondly, the groundwork undertaken in order to examine morality in decision-
making will be founded on three pillars: (1) “the greatest good to the greatest
number”,3 as stated Jeremy Bentham; (2) “act only according to that maxim whereby
you can at the same time, will that it should become a universal law”,4 posed by
Kant; and (3) “the morality of an act is a function of the state of the system at the time
it is performed”, according to Joseph Fletcher. These different degrees of morality
lead to different approaches, namely, utilitarianism, Kantianism (highlighting the
2
As noted by Hedley Bull (2002: 13), and bringing up his definition according to the issue of CC we
perceive, it is worthy to discuss whether our shared beliefs frame the states nowadays as a society of
states, a system of states or rather as an international anarchy.
3
The idea of the greatest good to the greatest number is essential in welfare functions and crucial in
all economics decision-making. Our Nash equilibria and evolutionary approach assume this kind of
instrumental rationality.
4
Also, again we are framing global universal concepts, such that in our global economic model, the
implications are that we are dealing with universal laws; thus, we are dealing with homogeneous
agents in economic terms.
22 A. B. Caleiro et al.
5
Once it considers “loving ends justify any means”, it is framed here as realist tradition.
Global Development and Climate Change: A Game Theory Approach 23
to this literature (Sen 1999; Stiglitz 2002; Sachs 2005, 2015), we have aimed to
predict the behaviour of states based on their level of technical capabilities and their
influence in foreign affairs. For example, the developed countries group consists
mostly of OCDE countries, whose industry, agriculture and finance sectors rank
highest in development. Developing countries, on the other hand, are better
represented by the BRICS and their emerging industry, as well as their weight in
trade and influence (e.g. demands they are making on the current structures of the
UN). Least-developed countries are those which are not significant with regard to
industry, economy or technical capabilities but are still included in our approach as
moral solutions must take into consideration the lives of their citizens, according to
the principles which govern the society of states on the issue of global welfare.
When discussing IP and the process of decision-making among states, one must
clarify the common ground, through the bindings of international law (base of
behaviour to political agents), the economic goals (where we stress rationality) of a
given country and the variables used by these rational agents to reach their objectives.
Currently the legal concerns surrounding treaties6 over the UNFCCC (United
Nations Framework Convention on Climate Change) can be summed, on its binding
features and the efficiency of sanctions. For example, it is generally accepted that
Kyoto treaty has failed (Nordhaus 2015) due to the US withdrawal (despite being
one of the treaty’s main architects) and a lack of ratification at state domestic level.
Despite the success of the ongoing Paris Agreement7 which was ratified by 172 of
197 parties, some analysts are concerned over the lack of sanction clauses. Countries
are taking action according to their own nationally determined contributions
(NDC’s), one of the innovative aspects of the Paris Agreement, but there is no
sanction in case of failure.
Rational agents here clearly face a deep-complex problem, as presented consid-
ering only the fields of IR and game theory. However we consider it is through the
welfare and its underlying ethical parameters and empirical facts the variables must
converge. Here our game theoretical analysis will focus on a new approach, evolu-
tionary game theory.
We now focus again on the instrumental rationality of the states and look at the
bases of game theory decision on the next section, which are at the roots of our
economics contribution.
6
The diplomatic process of making treaties is the primary source of international law, and it goes
through different stages before becoming binding/an international law: (1) negotiation (two or more
countries design the treaty according to their interests), (2) ratification (the approval of the treaty by
their domestic policy institutions), (3) renegotiation (after domestic discussions/parley, treaties may
suffer some alterations) and (4) implementation (the approval of a treaty by international
institutions).
7
http://unfccc.int/paris_agreement/items/9485.php–accessed on December 22, 2017.
24 A. B. Caleiro et al.
On the economic side, many renowned economists have found common ground in
some models despite focusing on different variables. Most of the work on the issue
of CC is based on integrated assessment models [IAM’s] which represent functions
that relate temperature change to economic losses, such as welfare. As the recent
study shown in Heal (2017), the default in almost every area of economics comes
from intellectual traditions such as utilitarianism (Heal 2017: 1047) and the Ramsey
rule (1928) precedent, which in turn converges with our analysis.
The Ramsey rule sets the variables used in economic analysis ranging from pure
rate of time preference, the elasticity of marginal utility, rate of growth consumption,
social rate of discount and many others. It is though in Heal we can verify the
existence of ethical parameters and empirical facts. Key aspects of economic anal-
ysis and its underlying philosophical aspects are recalled here as moral and/or
technical solutions. Heal and his recent study shows the problem of convergence
among economists “an irony that seems to have escaped most of commentators is
that while Nordhaus (2007), Stern (2006) and Weitzman (2007) all invoke the
Ramsey equation in their choices of parameters, this equations does not in fact
apply to the optimal climate-management problem. The reason is, of course, the
external effect associated with the emissions of GHGs”.
A historical approach to game theory recalls that the first paper on the existence of
a solution for a non-cooperative zero-sum game was Von Neumann’s (1928)
classical paper. The foundations of game theory were introduced by what is now
seen as the opus magnum of this field: Von Neumann and Morgenstern’s (1944)
manual, Theory of Games and Economic Behaviour. Nevertheless, throughout its
500 pages, this book only found solutions for non-cooperative games, a traditional
conflict framework among agents, but for a very specific case, zero-sum games. A
zero-sum game is a kind of game in which the gains of some exactly offset the losses
of others, thus establishing that when someone gains is at another’s expense, so there
are no win-win or lose-lose equilibriums.
Von Neumann was a Hungarian born polymath genius whose approach was
based on cooperation and dialogue; so he always tried to find cooperative solutions
to non-cooperative games by forming coalitions. It was an ingenious young Amer-
ican mathematician, John Nash, who in his early 20s, also at Princeton, established
through two simple papers (Nash 1950a, b, 1951), the first axiomatic approach to
equilibria in economics and a general solution to non-cooperative games, including
also non-zero-sum games.8,9 Khun (1953) was the first to introduce the extensive
8
Where Von Neumann was a cooperative group leader and discussant, Nash had an individualistic
approach (Nasar 1998); thus the different approaches both men dealt with led to quite different
conclusions, and both men were playing rivals and not coalitions.
9
Nash, a bright young genius in his early 20s, would entry into a spiral of mental illness for 30 years
to recover quite miraculously and win the 1994 Nobel prize in economics for his solution general
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couronne à Diran, qui, soutenu par les Romains, battit les Perses et
les chassa de l'Arménie. Ce nouveau roi imita la conduite de son
prédécesseur; en payant également tribut aux Romains et aux
Perses, il chercha à garder la neutralité entre les deux empires. Il fut
la victime de cette politique insensée.
[103] On voit que Gibbon (t. 2, p. 161 et 349-356, et 368; t. 3, p. 463) a cherché à
faire usage dans son histoire, des renseignements fournis par Moïse de Khoren, le
seul des historiens arméniens qui ait été traduit en latin (Lond. 1736, 1 vol. in-4o).
Gibbon ne s'est pas aperçu de toutes les difficultés chronologiques que présentent
les récits de cet écrivain. Il n'a pas songé à toutes les discussions critiques, que
son texte devait subir, avant que de le combiner avec les récits des auteurs
occidentaux. Faute d'une telle attention, Gibbon a rendu les renseignements qu'il y
a puisés, plus fautifs qu'ils ne le sont dans l'original. Ce jugement s'applique même
à tout ce que l'historien anglais a tiré de l'auteur arménien. L'histoire de Moïse de
Khoren a été pour moi l'objet d'un travail particulier, dans lequel j'ai discuté son
texte de tout point; et c'est avec confiance que je présente les résultats que je
place ici, et ceux qui entreront dans la suite de mon travail supplémentaire. Pour
faire juger de la différence, qui existe sur ce point, entre moi et Gibbon, je me
contenterai de remarquer, qu'il a commis presque partout un anachronisme d'une
trentaine d'années, d'où il s'ensuit qu'il rapporte au règne de Constance beaucoup
d'événements, arrivés du temps de Constantin. Il n'a donc pu reconnaître la liaison
véritable qui existe entre l'histoire romaine et celle d'Arménie, ni se faire une juste
idée des raisons qui portèrent Constantin, vers la fin de sa vie, à faire la guerre
aux Perses, non plus que des motifs qui retinrent si long-temps Constance dans
l'Orient. Il n'en a même fait aucune mention.—S.-M.
[104] On sait que Tiridate fut obligé, vers la fin de son règne, de soutenir une
guerre contre Maximin, à cause de son attachement pour le christianisme. Voyez
ci-devant, l. 1, p. 76 et 77. Il paraît que, antérieurement, il avait, comme allié des
Perses, soutenu plusieurs guerres contre les Romains; nous en avons pour
preuve le surnom d'Armeniacus Maximus, que Galérius prenait pour la sixième
fois, eu l'an 311, comme on le voit par l'édit qu'il publia au sujet des chrétiens.
Voyez Euseb. Hist. eccl., l. 8, c. 17.—S.-M.
[105] Selon l'historien Moïse de Khoren (l. 2, c. 76), Tiridate, son père, aurait eu,
avant son avénement, des relations intimes avec Licinius; on pourrait croire alors
que ce fut cet empereur, qui rendit à Chosroès la couronne de ses aïeux. Licinius,
depuis la mort de Maximin, arrivée au mois d'août de l'an 313, était le maître de
tout l'Orient, et par conséquent en mesure de secourir les Arméniens.—S.-M.
[106] Il est question dans le Code Théodosien (l. 3, de inf. his quœ sub tyr.), d'un
Antiochus qui vivait à la même époque, et qui était, en 326, préfet des veilles à
Rome, præfectus vigilum. On voit dans un fragment du même ouvrage récemment
découvert par M. Amédée Peyron, et inséré dans le t. 28 des Mémoires de
l'académie de Turin, que cet Antiochus occupait déja les mêmes fonctions en l'an
319. Il se pourrait qu'il eût été antérieurement envoyé en Arménie.—S.-M.
[107] Les princes de la famille Camsaracane descendaient de la branche des
Arsacides, qui régnait dans la Bactriane. Ils se réfugièrent en Arménie, sous le
règne de Tiridate pour fuir les persécutions des Perses; ils y reçurent de ce prince
les provinces d'Arscharouni et de Schirag, dans l'Arménie centrale, sur les bords
de l'Araxes. Ils en conservèrent la possession jusqu'au huitième siècle. Voyez ce
que j'ai dit à ce sujet, dans mes Mémoires historiques et géographiques sur
l'Arménie, t. 1, p. 109, 111 et 112 et passim. Voyez aussi un article que j'ai inséré
dans la Biographie universelle, t. 33, p. 324.—S.-M.